The Only Issue Which Falls For Consideration Is As Towhether The Assessee/M/S.tidel Park Ltd., Is Entitled Forclaiming Exemption Under Section 80Ia Of The Incom v. Https://Hcservices.ecourts.gov.in/Hcservices

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 20.11.2018 CORAM : THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMandTHE HONOURABLE MR.JUSTICE N.SATHISH KUMAR Tax Case Appeal No.28 of 2009 M/s.Tidel Park Ltd.,4, Canal Bank Road,Taramani,Chennai-600 113 .... Appellant -vs- The Assistant Commissioner of Income Tax,Company Circle III(2),Chennai-600 034 ... Respondent Tax Case Appeal filed under Section 260A of the IncomeTax Act, 1961 against the order of the Income Tax AppellateTribunal Chennai 'C' Bench, dated 08.08.2008 in ITANo.750/Mds/2007, for the Assessment year 2003-04. Against the Order of Commissioner of Income Tax(Appeals) – III, Chennai Order dated 16/01/2007 in ITA.No.67/2006-07/A-III, for the Assessment Year 2003-04 and againstthe Order of the Assistant Commissioner of Income Tax, Companycircle III(2),Chennai,Orderdated10/03/2006 inP.A.No./G.I.R.No. 32333/AABCT0666R for the Assessment Year 2003-2004. For Appellant:Mr.M.SwaminathanFor Respondent:M/s.Vijayaraghavan JUDGMENT[Judgement of the Court was delivered by T.S.Sivagnanam, J.]This appeal, filed by the appellant/assessee, underSection 260-A of the Income Tax Act, 1961 (The 'Act' forbrevity), is directed against the order passed by the IncomeTax Appellate Tribunal, Madras 'C' Bench, in ITANo.750/Mds/2007, dated 08.08.2008, for the Assessment year 2003-04.2.The Appeal has been admitted on the following https://hcservices.ecourts.gov.in/hcservices/ Substantial Questions of Law: "1.Whether on the facts and in thecircumstances of the case, the Tribunal wasright in holding that the appellant is notentitled to deduction under Section 80IA inrespect of interest income from depositamountingtoRupees4,79,21,226/-,Miscellaneous Income of Rs.46,72,181/-, otherrent of Rs.1,01,98,239/-? 2.Whetheronthefactsandcircumstances of the case, the Tribunal failedto appreciate the entire income of theAppellant is derived only from developing,running and maintaining of infrastructureproject (STP) and hence no part of the same canbe excluded in computing the relief underSection 80IA?” 3.Heard Mr.M.Swaminathan, the learned counsel for theappellant/assessee and Mr.Vijayaraghavan, the learned Counselfor the respondent/Revenue. 4.The only issue which falls for consideration is as towhether the assessee/M/s.Tidel Park Ltd., is entitled forclaiming exemption under Section 80IA of the Income Tax Act,1961 in respect of interest income, miscellaneous income andother rent. 5.The assessee company, during the assessment year inquestion (2003-04), has shown interest income, othermiscellaneous income and rent etc. The assessee contended thatthey had taken the land on lease from the adjacent property withM.G.R.Film City and in this land, the facilities of swimmingpool, play area, parking are provided to the members and themiscellaneous income/rent, include services from the aboveleased property. The assessee company submitted that the entireincome arising to the company is inextricably connected with theinfrastructural project and therefore, entitled for deductionunder Section 80IA of the Act. The Assessing Officer did notagree with the assessee holding that interest on deposit inbanks are not eligible for Section 10B/10A exemption and in thisregard relied on the decision of this Court in the case ofCommissioner of Income Tax vs. Menon Impex Private Limited (259ITR 403). Further, by referring to the other decisions, it waspointed out that the word 'derived' has narrower meaning thanthe word 'attributable to'. The word 'derived' is followed bythe word 'from', which shows that there should be a direct nexusbetween the source and the income generated. 6.The assessee filed appeal before the Commissioner ofIncome Tax (Appeals-III) ('CITA' for brevity). The CITA agreedwith the view taken by the Assessing Officer and held that thefacilities on leased property cannot be stated to be part ofinfrastructure project under consideration. There were otherissues which were dealt with in the appeal and the matter wasremanded by the appellate authority to the Assessing Officer fora decision on those issues. 7.In respect of the denial of the exemption under Section80IA of the Act, in so far as it relates to interest income,miscellaneous income and other rent, the assessee preferredappeal before the Tribunal. The Tribunal agreed with the viewexpressed by the Assessing Order and the Commissioner of IncomeTax (Appeals) and held that the miscellaneous income and rentalincome cannot be said to be profits and gains 'derived' by theundertaking from the eligible business. Aggrieved by the same,the assessee is before this Court with this appeal. 8.The learned counsel appearing for the assessee referredto the approval granted for setting up of industrial park by theGovernment of India, vide Notification dated 24.05.1999.Referring to the terms and conditions of the approval, it issubmitted that the Notification mandates certain facilities tobe provided as common facilities, which are what have beenprovided by the assessee. Further, in so far as the modules aretransferred to 3[rd] parties, an amount of 5% of the cost isretained in a separate account to take care of repairs andmaintenance and the interest there from should be construed asinterest derived from the undertaking. Further, the learnedcounsel has drawn our attention to a sample Lease Deed executedin favour of a company by the assessee dated 12.07.2010 todemonstrate that all the facilities provided are integral partof the infrastructural project and they are inextricably linkedwith the project and therefore, would qualify for exemptionunder Section 80IA of the Act. The learned counsel relied onthe Circular issued by the Central Board of Direct Taxes inCircular No.16 of 2017, dated 25.4.2017, to state that rent fromletting out of premises/developed space along with otheramenities in Industrial Park/SEZ is to be treated as businessincome. Reliance was also placed on the decision of the HighCourt of Karnataka in the case of Commissioner of Income Tax andanother v. Information Technology Park [(2014) 369 ITR 0460(Karn)], wherein it was held that rental income received by theassessee cannot be chargeable to tax as rental income receivedby the assessee fell under 'business income' and not under'income from house'. Reliance was placed on the decision of theHigh Court of Karnataka in the case of Commissioner of IncomeTax vs. Velankanni Information Systems (P) Ltd., [(2013) 218 TAXMAN 0088 (Karnataka)], wherein it was held that whereagreements were entered into contemporaneously and object was toenjoy the entire property, viz., building, furniture andaccessories as a whole, which was necessary for carrying onbusiness, income derived there from cannot be separated based onseparate agreement entered into between the parties and theentire income is assessable as business income. For the abovegrounds, the learned counsel for the assessee submits that theorder passed by the Tribunal calls for interference. TAXMAN 0088 (Karnataka)], wherein it was held that whereagreements were entered into contemporaneously and object was toenjoy the entire property, viz., building, furniture andaccessories as a whole, which was necessary for carrying onbusiness, income derived there from cannot be separated based onseparate agreement entered into between the parties and theentire income is assessable as business income. For the abovegrounds, the learned counsel for the assessee submits that theorder passed by the Tribunal calls for interference. 9.The Learned counsel appearing for the Revenue, whileseeking to sustain the order passed by the Tribunal, submittedthat the CIT(A) and the Tribunal rightly interpreted the natureof income and found that the miscellaneous income, rental incomeand interest income cannot be said to the profits and gainsderived by the undertaking from the eligible business. Further,it is submitted that the documents which are placed by theassessee before this Court, viz., the approval granted by theGovernment of India, the Lease Deed etc., were never placedbefore the Tribunal and it is not clear as to whether theapproval Notification was placed before the Assessing Officer.Further, it is pointed out that the sample Lease Deed producedbefore this Court, is dated 12.07.2010, much after theassessment was complete and even much after the order passed bythe Tribunal. 10.After elaborately hearing the learned counsels for theparties and carefully perusing the materials placed on record,we are of the considered view that the matter can be remanded tothe Assessing Officer for fresh consideration. We say sobecause, the matter has been remitted to the Assessing Officeron other issues, viz., merits of the assessment, as canvassed bythe assessee. So far as, the claim for exemption under Section80IA of the Act is concerned, it requires interpretation of thedocuments and how the income was treated in the hands of theassessee and how the contracting parties understood thetransaction, whether the notification issued by the Governmentof India mandates the provision of other amenities andfacilities and whether these amenities and facilities areintegral part of the infrastructural project, are all factualmatters to be decided by the Assessing Officer. Though theRevenue would contend that the documents were not placed beforethe Tribunal, we do not want to shut out the assessee ontechnicalities, as the issue is a recurring issue and theendeavour should be to give a quietus to the issue and to ensurethat the correct income is taxed at the hands of the assessee. 11.Thus, for the above reasons, the order passed by theTribunal on the above issue is set aside and the matter isremanded to the Assessing Officer for fresh consideration. The assessee is granted liberty to place all the documents beforethe Assessing Officer, who shall consider that issue afresh andtake a decision on merits and in accordance with law. So far asthe sample Lease Deed is concerned, we are fully conscious ofthe fact that it is dated 12.07.2010 and obviously the assesseecould not have produced the same either before the AssessingOfficer or before the Commissioner of Income Tax (Appeals) orbefore the Tribunal, because, all the proceedings concluded inthe year 2008 itself. Therefore, the assessee is at liberty toproduce the copies of the relevant documents, relating to theassessment year under consideration, as observed supra. In the light of the above, the Substantial Questions ofLaw are left open and the appeal filed by the assessee isallowed. No costs. Sd/- Assistant Registrar(CS-IV) //True Copy// Sub Assistant RegistrarmskTo1.The Income Tax Appellate Tribunal Madras 'C' Bench.2.The Commissioner of Income Tax (Appeals)-III, Chennai.3. The Assistant Commissioner of Income Tax, Company Circle III (2), Chennai. In the light of the above, the Substantial Questions ofLaw are left open and the appeal filed by the assessee isallowed. No costs. Sd/- Assistant Registrar(CS-IV) //True Copy// Sub Assistant RegistrarmskTo1.The Income Tax Appellate Tribunal Madras 'C' Bench.2.The Commissioner of Income Tax (Appeals)-III, Chennai.3. The Assistant Commissioner of Income Tax, Company Circle III (2), Chennai. +1cc to Mr.Subbaraya Aiyar, Advocate, S.R.No. 79389+1cc to Mr.S.Premalatha, Advocate, S.R.No. 79852 T.C.A.No.28 of 2009RV(CO)GN(19/12/2018)